Endogenous Corruption, Inequality and Growth: Econometric Evidence

Raul Barreto

No 2001-02, School of Economics and Public Policy Working Papers from University of Adelaide, School of Economics and Public Policy

Abstract: This paper empirically addresses three questions. First, what is corruption's effect on economic growth? Second, what are the factors that determine corruption? Third, what is the relationship among corruption, economic growth, and income distribution? I use a cross section of countries, both developed and underdeveloped. I find that corruption is an important determinant of both per-capita real growth and of the distribution of income. Corruption is positively and significantly correlated with growth, implying that corruption has efficiency-enhancing qualities. Corruption is positively and significantly correlated with inequality, implying that increased income inequality is associated with greater corruption. The most robust specification, which associates three jointly dependent equations using a two-stage least squares estimation technique, reinforces the proposition that corruption enhances efficiency, justifies inequality's role in determining growth rates, and lends support to the theory of international convergence of growth rates.

Keywords: endogenous growth; corruption (search for similar items in EconPapers)
JEL-codes: O17 O40 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2001
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Citations: View citations in EconPapers (16)

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